Plant-based food and beverage company SunOpta (NASDAQGS:STKL) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 21.1% year on year to $171 million. The company's full-year revenue guidance of $720 million at the midpoint also came in 2.7% above analysts' estimates. It made a non-GAAP profit of $0.02 per share, improving from its loss of $0.04 per share in the same quarter last year.
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SunOpta (STKL) Q2 CY2024 Highlights:
- Revenue: $171 million vs analyst estimates of $159.9 million (6.9% beat)
- EPS (non-GAAP): $0.02 vs analyst estimates of $0.01 ($0.02 beat)
- The company lifted its revenue guidance for the full year from $700 million to $720 million at the midpoint, a 2.9% increase
- EBITDA Margin: 11.6%, down from 13.1% in the same quarter last year
- Free Cash Flow was -$15.28 million compared to -$2.28 million in the previous quarter
- Sales Volumes rose 26.9% year on year (-10.2% in the same quarter last year)
- Market Capitalization: $607.7 million
“We delivered another quarter of outstanding growth, reflecting strong underlying demand and solid execution on operational initiatives aimed at sustainable supply chain effectiveness and efficiency,” said Brian Kocher, Chief Executive Officer of SunOpta.
Committed to clean-label foods, SunOpta (NASDAQGS:STKL) is a sustainability-focused food and beverage company specializing in the sourcing, processing, and packaging of natural and organic products.
Shelf-Stable Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
SunOpta is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's revenue has declined over the last three years, dropping 5.2% annually. This is among the worst in the consumer staples industry, where demand is typically stable.
This quarter, SunOpta reported remarkable year-on-year revenue growth of 21.1%, and its $171 million in revenue topped Wall Street estimates by 6.9%. Looking ahead, Wall Street expects sales to grow 6.8% over the next 12 months, a deceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
SunOpta's demanding reinvestments have consumed many resources over the last two years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 5.3%, poor for a consumer staples business.
Taking a step back, we can see that SunOpta failed to improve its margin during that time. Its unexciting margin and trend likely have shareholders hoping for a change.
SunOpta burned through $15.28 million of cash in Q2, equivalent to a negative 8.9% margin. The company's quarterly cash flow turned negative after being positive in the same quarter last year. This warrants extra attention because consumer staples companies typically produce more consistent and defensive performance.
Key Takeaways from SunOpta's Q2 Results
We were impressed by how significantly SunOpta blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 7.4% to $5.68 immediately after reporting.
SunOpta may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.